Oracle’s Wisconsin data centre plans have hit a $7 billion collateral wall, just as its AI spending looks wobblier.
According to the Financial Times the Public Service Commission of Wisconsin has refused to rethink tougher credit rules for utility We Energies. The rules could force Oracle to provide a $7 billion letter of security, costing more than $100 million a year.
Oracle needs the nearly one-gigawatt data centre in Port Washington, Wisconsin, for its $300 billion OpenAI computing contract. The added power-security costs put Oracle’s plans in jeopardy.
We Energies’ “very large customer” tariff says data centre developers rated below S&P single A minus must post collateral. That can mean cash or a letter of credit. The collateral is based on the value of power plants and transmission lines built to feed the data centre. Oracle was rated triple B at the time, two notches below the threshold.
Oracle asked a county judge last month to strike down the rule and let We Energies waive the requirement. It said the rules risk “imposing these onerous financing costs upon Oracle and potentially discouraging future investment in Wisconsin”.
A regulator representative told the FT on Monday it had “declined to take action on the petition”. That leaves Oracle with a legal fight and another expensive lump in its AI shopping basket.
Oracle said it hoped the commission would reconsider after weighing jobs and economic growth from the $15 billion project. It said it remains “committed to providing the financial guarantees needed to ensure there is no risk to Wisconsin ratepayers”.
The decision is an early setback for Oracle, which is expected to keep slugging it out in court. It shows state regulators are getting twitchy about giant AI infrastructure projects becoming stranded assets.
The worry is simple enough. If these schemes lack serious financial backing, ordinary electricity customers could end up paying for shiny new power gear they don’t want.
Scrutiny of Oracle’s creditworthiness grew this month after S&P cut its rating to triple B minus. That is one notch above junk.
S&P cited an uncertain path to profitability while Oracle burns cash on AI kit. That deteriorating credit profile could rattle tens of billions of dollars in construction debt underwritten by the cocaine nose jobs of Wall Street.
As anxiety rises over electricity bills, 24 states have approved “large load tariffs” for data centres and other big industrial users. These usually include minimum contract terms, exit fees and collateral.
Big tech outfits and manufacturers claim the tariffs are discriminatory and impose high costs. Wisconsin’s regulator was unmoved, saying: “Tariffs should be designed such that existing Wisconsin customers do not subsidise data centres, now or in the future,” it said.
